The following is a general synopsis of catastrophe liability coverage and some perspective of the need for large limits of liability protection:

Catastrophe Liability Policies

Catastrophe Liability policies, sometimes referred to as umbrella policies or excess liability policies, are designed to provide high limits of protection that sit on top of underlying automobile, home and/or other liability limits. The purpose of these policies is to provide insureds with large limits of protection to cover damages resulting from catastrophic events for which an insured may be held responsible, or liable. Some policies may also provide liability protection for events otherwise not covered by underlying policies.

Why are large limits of liability necessary?

The ownership and use of vehicles, residences, businesses, business equipment, recreational vehicles, boats, etc. creates the possibility for catastrophic events. In addition, many of the recreational and/or other activities we undertake daily may create opportunity for catastrophic loss.

Many insureds feel comfortable with the mere purchase of "insurance" in its broadest definition without considering the limitation(s) of coverages and limits within the policies they've purchased. No policy covers "everything," and nearly every policy places a maximum limit of liability for which an insurance company is obligated to "stand by your side." The fact is, most underlying policies for automobile, personal, and business liability do not provide adequate limits of protection to insulate you from personal loss resulting from a significant catastrophic event. Of course, in the worst of events, even catastrophe liability policies may not provide sufficient protection.

Catastrophic events can come in many forms; however, vehicle accidents are a common cause. When you injure another party in an accident deemed to be your fault, or comparatively your fault, through use of your vehicle or because of your activity, you will be held responsible, or liable, for the resulting damages. Damages can also come in many forms; however, bodily injury to others is often the cause for extremely large damages. Consider the following regarding the cost of damages related to bodily injury:

• Actual Medical Bills are the most obvious and visible costs we associate with hurting someone else. Hospital stays become very expensive very quickly. Moreover, if burns, significant fractures, severed limbs, broken backs or necks, brain trauma, or comas are involved, the ensuing hospital stay, treatment recourses, and rehabilitative efforts will be lengthy and very expensive.
• The loss of income, or the loss of income generation ability, is less obvious and visible, but it represents one of the most significant of loss exposures. An individual can, and probably will, lose significant income while in a hospital or in rehabilitation. If an individual is rendered disabled as a result of the accident, permanent partial loss of income or permanent total loss of income may ensue. Depending upon the age and income earning potential of the injured party, these damages could be astronomical. Some will have insurance for disability and lost income; however, generally, the injured party's rights to recover damages are simply transferred and you become liable to the insurance company in lieu of the injured party.
• Loss of consortium and affection to loved ones, mental anguish and trauma, and many other subjective damages may be awarded to an injured party or their family and relatives.
• Punitive damages are generally not covered by insurance in Indiana; however, large punitive awards may be given when negligence is determined to be gross or excessive.

The sum of potential liability can be staggering. The purchase of insurance does not transfer your liability, but, rather, simply contracts an insurance company to pay liability damages on your behalf. Generally, that contract also provides for your defense, sometimes outside of your limits and sometimes within; however, once your purchased limit of protection is exhausted, the insurance company's obligation to defend you terminates. Damages in excess of your limits, and any defense costs you incur, remain your responsibility. If a catastrophic event occurs and the insurance company believes they cannot successfully defend you, they have the right to pay the policy limit and retire from your defense.

In the event of a truly serious accident, how much protection is a limit of $50,000, or a limit of $100,000, or a limit of $300,000, or even a limit of $500,000. When you purchase low underlying limits, you gamble that you will not be involved in and held responsible for a major accident. Many people don't believe a serious accident can or will happen to them, but they may be gambling more than they know and at odds worse than they realize.

How much liability coverage should you buy?

The probability of experiencing a financial loss in excess of your policy limit dramatically decreases as your purchased protection limit increases. Before you buy a catastrophe liability policy, you should consider increasing your underlying policy limits. Generally, increased limits are very affordable, and purchasing higher deductibles will often cover the difference.

Catastrophe liability and umbrella policies generally provide limits of $1,000,000 to $5,000,000 (more for business and commercial operations), and the cost will vary by a number of factors related to underlying risk such as the number of drivers, vehicles, and other exposures. Youthful operators also affect premium. Generally, however, the cost of these policies is surprisingly affordable, and everyone should investigate their own cost for this additional protection. Call your insurance agent for a quote…it's the only way to determine its affordability to you.

How much liability coverage should you buy?

The answer to this question is ... all you can! Liability protection is absolutely one of the most important coverages you can purchase.

How to obtain a catastrophe insurance premium quotation:

If you are interested in a free, absolutely no-obligation catastrophe liability insurance quote, please give us a call at 765.472.4085 (local) or toll free at 866.361.6100.